CONSUMER CONFIDENCE IS RED HOT

The Conference Board's consumer confidence index surged to 102.9 in January from 93.1 a month ago.

This was much stronger than the 95.5 expected by economist.

"Consumer confidence rose sharply in January, and is now at its highest level since August 2007 (Index, 105.6)," the Conference Board's Lynn Franco said. "A more positive assessment of current business and labor market conditions contributed to the improvement in consumers' view of the present situation. Consumers also expressed a considerably higher degree of optimism regarding the short-term outlook for the economy and labor market, as well as their earnings."

Consumers' assessment of present-day conditions was considerably more favorable in January than in December. Those saying business conditions are "good" increased from 24.7 percent to 28.1 percent, while those claiming business conditions are "bad" decreased from 18.9 percent to 16.8 percent. Consumers were also much more positive in their assessment of the job market. Those stating jobs are "plentiful" increased from 17.2 percent to 20.5 percent. Those claiming jobs are "hard to get" decreased from 27.3 percent to 25.7 percent.

Consumers' optimism about the short-term outlook improved in January. The percentage of consumers expecting business conditions to improve over the next six months rose from 17.8 percent to 18.4 percent, while those expecting business conditions to worsen declined from 9.9 percent to 7.7 percent.

Consumers' outlook for the labor market was also more optimistic. Those anticipating more jobs in the months ahead increased from 14.6 percent to 16.7 percent, while those anticipating fewer jobs declined from 16.5 percent to 15.0 percent. The proportion of consumers expecting growth in their incomes improved from 16.2 percent to 20.0 percent. However, the proportion expecting a decrease increased marginally, from 10.2 percent to 11.3 percent.

"This reflects the significant boost to real incomes from continued strong employment growth and the plunge in gasoline prices," Capital Economics Andrew Hunter said. "What's more, this is no outlier, with all of the other main measures of confidence having also reached multi-year highs."

"It's hard to imagine a better textbook illustration of the different effects of a plunge in oil prices than this report and the drop in durable goods orders reported earlier," Pantheon Macroeconomics said. "Consumers love falling gas prices more than just about anything else, but the oil business hates them, and is slashing its spending in response. The key point is that consumption is nearly 70% of the economy, whereas oil companies' capex, equipment and structures, is just over 1%."